The USD/CHF pair has dropped to near 0.9040 due to multiple factors including the recent US Dollar weakness and the strong performance of the Swiss economy. The US Dollar weakened after the second estimate of Q1 GDP growth came in lower than expected at 1.3%, leading to a sharp correction in the currency. This has caused the US Dollar Index (DXY) to fall further to 104.70 as investors adjust their expectations for US economic growth.
The lower than expected GDP growth has impacted market sentiment towards the US Dollar, with speculation rising about potential Fed rate cuts in September in response to the slower economic expansion. The upcoming US core Personal Consumption Expenditure Price Index (PCE) data for April will be closely watched for signs of inflation growth, which could further influence market expectations for future Fed actions.
On the other hand, the Swiss Franc has strengthened after the release of the Q1 GDP report, which showed that the Swiss economy expanded by 0.5% compared to the consensus and previous estimates of 0.3%. This positive economic data has increased the upside risks to inflation in Switzerland, potentially leading the Swiss National Bank (SNB) to rethink any plans for further rate cuts in the near future.
Looking ahead, the US Dollar is expected to remain volatile as investors await key economic data releases and monitor developments in Fed policy. The Swiss Franc, on the other hand, may continue to benefit from the strong economic performance and the potential for lower inflation risks. Overall, the USD/CHF pair will likely be influenced by a combination of US Dollar dynamics and Swiss economic data in the coming weeks.
